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Green Manufacturing, Inc., plans to announce that it will issue $2.01 million of perpetual debt and use the proceeds to repurchase common stock. The bonds will sell at par with a coupon rate of 7 percent. Green is currently an all-equity firm worth $6.48 million with 410,000 shares of common stock outstanding. After the sale of the bonds, Green will maintain the new capital structure indefinitely. Green currently generates annual pretax earnings of $1.51 million. This level of earnings is expected to remain constant in perpetuity. Green is subject to a corporate tax rate of 30 percent. a. What is the expected return on Green’s equity before the announcement of the debt issue? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Expected return 16.31 % b. What is the price per share of the firm’s equity? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Price per share $ 15.80 d. What is Green’s stock price per share immediately after the repurchase announcement? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) New share price $ e-1. How many shares will Green repurchase as a result of the debt issue? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Shares repurchased e-2. How many shares of common stock will remain after the repurchase? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) New shares outstanding g. What is the required return on Green’s equity after the restructuring? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Required return %
A video store (AVS) runs a series of fairly standard video stores. Before a video can be put on the shelf, it must be catalogued and entered into the video database. Every customer must have a valid AVS customer card in order to rent a video. Custome..
Julie currently has on hand $30,000 that will be deposited in a savings account until it accumulates to $50,000. How long will it take Julie to accumulate the $50,000, assuming 7% compounding on an annual basis? Please show work.
A municipal bond with a coupon rate of 3.1 percent has a yield to maturity of 4.1 percent. Assume a face value of $5,000. If the bond has 8 years to maturity, what is the price of the bond?
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Security Percent of portfolio Beta. Calculate the beta portfolio
Renfro Rentals has issued bonds that have a 12% coupon rate, payable semiannually. The bonds mature in 6 years, have a face value of $1,000, and a yield to maturity of 10.5%. What is the price of the bonds? Round your answer to the nearest cent.
You are given the following information for Smashville, Inc. Cost of goods sold: $ 175,000 Investment income: $ 2,800 Net sales: $ 237,000 Operating expense: $ 42,000 Interest expense: $ 7,400 Dividends: $ 10,000 Tax rate: 30 % Current liabilities: $..
Suppose after you graduate, you plan to be a stock analyst for a big financial institution. You know that if the stock market increases in value, your will get a good job with a good salary. If the stock market declines, you will get a job, but the s..
After successfully completing your corporate finance class, you feel the next challenge ahead is to serve on the board of directors of Schenkel Enterprises. Unfortunately, you will be the only person voting for you. If Schenkel has 445,000 shares out..
research a company of your choice and locate the latest financial statements published by the company.for the following
S&P has previously given a BBB rating on On-The-Bubble Corporation. Today, On-The-Bubble Corporation’s investment banker gives the company’s CFO a frightening call. If the downgrade does occur, do you think On-The-Bubble Corporation could still fund ..
We know the following about Radice. Total assets are $120m, D is $40m, E is $60m, preferred stock of $20m, cash is $10m and the # of shares is 1m. We estimate that the market value of equity is 3 times the book value of it. Finally, a fire sale of th..
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